Question 1

A bank has $30,000 in deposits and has $5,400 in reserves. What is its reserve ratio?

Accepted Answer

The answer of A bank has $30,000 in deposits and...

Question 2

Jim transfers money from his money market account to his savings account. This action

Accepted Answer

A)   reduced M1 and increases M2.
B)   increases M1 and reduces M2.
C)   has no effect on M1 or M2.
D)   increases M1 and M2.

Question 3

List two examples of commodity money.

Accepted Answer

Commodity money refers to mone...

Question 4

When the Fed conducts open-market purchases,

Accepted Answer

A)   banks buy Treasury securities from Fed, which increases the money supply.
B)   banks buy Treasury securities from the Fed, which decreases the money supply.
C)   it buys Treasury securities, which increases the money supply.
D)   it buys Treasury securities, which decreases the money supply.

Question 5

Over one time horizon or another, Fed policy decisions influence

Accepted Answer

A)   inflation and employment.
B)   inflation but not employment.
C)   employment but not inflation.
D)   neither inflation nor employment.

Question 6

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

Accepted Answer

A)   $30 of new money.
B)   $3,000 of new money.
C)   $12,000 of new money.
D)   None of the above is correct.

Question 7

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)   are appointed by the president of the U.S. and confirmed by the U.S. Senate.
B)   serve six-year terms.
C)   are also the presidents of the regional Federal Reserve banks.
D)   share power equally, with no governor having any more influence or power than any other governor.

Question 8

The money supply increases when the Fed

Accepted Answer

A)   buys bonds. The increase will be larger, the smaller is the reserve ratio.
B)   buys bonds. The increase will be larger, the larger is the reserve ratio.
C)   sells bonds. The increase will be larger, the smaller is the reserve ratio.
D)   sells bonds. The increase will be larger, the larger is the reserve ratio.

Question 9

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

Accepted Answer

A)   a central bank.
B)   a charter bank.
C)   a national bank.
D)   a state bank.

Question 10

The Fed's primary tool to change the money supply is

Accepted Answer

A)   changing the interest rate on reserves.
B)   changing the reserve requirement.
C)   conducting open market operations.
D)   redeeming Federal Reserve notes.

Question 11

Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

Accepted Answer

A) True 
 B)False

Question 12

The manager of the bank where you work tells you that your bank has $6 million in excess reserves. She also tells you that the bank has $400 million in deposits and $362 million dollars in loans. Given this information you find that the reserve requirement must be

Accepted Answer

A)   44/400.
B)   6/362.
C)   38/400.
D)   32/400.

Question 13

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)   are elected to office by the public every fourteen years.
B)   are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives.
C)   are elected by bankers in each Federal Reserve Region.
D)   are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Question 14

Table 29-8
 
-Refer to Table 29-8. This bank's leverage ratio is

Accepted Answer

A)   2.
B)   50.
C)   13.3.
D)   7.5.

Question 15

When the Fed conducts open-market sales,

Accepted Answer

A)   it sells Treasury securities, which increases the money supply.
B)   it sells Treasury securities, which decreases the money supply.
C)   it auctions term loans, which increases the money supply.
D)   it auctions term loans, which decreases the money supply.

Question 16

Traveler's checks are included in

Accepted Answer

A)   M1 but not M2.
B)   M2 but not M1.
C)   M1 and M2.
D)   neither M1 nor M2.

Question 17

A problem that the Fed faces when it attempts to control the money supply is that

Accepted Answer

A)   the 100-percent-reserve banking system in the U.S. makes it difficult for the Fed to carry out its monetary policy.
B)   the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.
C)   the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount.
D)   the Fed does not control the amount of money that households choose to hold as deposits in banks.

Question 18

Credit cards

Accepted Answer

A)   represent the largest component of M1.
B)   are not included in M1 but are included in M2.
C)   are a form of money unique to the U.S.
D)   are not considered money.

Question 19

At the Federal Reserve,

Accepted Answer

A)   the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets about every six weeks.
B)   the nation's monetary and fiscal policies are made by the Federal Open Market Committee, which meets twice a year.
C)   the nation's monetary policy is made by the Federal Open Market Committee, which meets about every six weeks.
D)   the nation's monetary policy is made by the Federal Open Market Committee, which meets twice a year.

Question 20

Which of the following is not included in either M1 or M2?

Accepted Answer

A)   U.S. Treasury bills
B)   small time deposits
C)   demand deposits
D)   money market mutual funds

Exam 11: The Monetary System

The money supply increases when the Fed

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The members of the Federal Reserve's Board of Governors

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When the Fed conducts open-market purchases,

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The manager of the bank where you work tells you that your bank has $6 million in excess reserves. She also tells you that the bank has $400 million in deposits and $362 million dollars in loans. Given this information you find that the reserve requirement must be

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If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

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The members of the Federal Reserve's Board of Governors

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Table 29-8 -Refer to Table 29-8. This bank's leverage ratio is

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List two examples of commodity money.

Correct AnswerverifiedCommodity money refers to mone...View AnswerShow Answer

At the Federal Reserve,

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Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

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Jim transfers money from his money market account to his savings account. This action

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A bank has $30,000 in deposits and has $5,400 in reserves. What is its reserve ratio?

Correct AnswerverifiedShow Answer

Which of the following is not included in either M1 or M2?

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When the Fed conducts open-market sales,

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Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money.

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A problem that the Fed faces when it attempts to control the money supply is that

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Traveler's checks are included in

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The Fed's primary tool to change the money supply is

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Over one time horizon or another, Fed policy decisions influence

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Credit cards

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Commodity money refers to mone...
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